As consumers, we’re addicted to our phones, TikTok, and Cometeer coffee. What about on the brand side? Well, brands are addicted to discounting, namely coupon codes. Why? They convert shoppers, and consumers are used to them.
Discounts come in many forms—coupon codes, markdowns, buy-one-get-one, free shipping, free gifts with purchase—but every discount always eats into profit margin. At the end of the day, they always trade profit for revenue.
Realizing how detrimental discounts—especially coupons—can be for brands, Oren Charnoff and his team set out to create a solution for today’s ecommerce brands. So, they built Fondue, a platform that helps brands ditch discount codes and drives profitable growth with their new discount type, CashBack.
Charnoff gave us the lowdown on the CashBack opportunity for Shopify brands. Keep reading to learn how saying goodbye to coupons and hello to CashBack increases conversion and grows profits…
“Coupon codes are great for shoppers, but they hurt brands.”
Why Ditch Coupon Codes?
Coupon codes are everywhere. They’re in emails. They’re in popups. They’re in ads. They’re in influencer videos. They’re in paid ads.
And, brands are addicted to coupons. Why? They convert shoppers.
At the same time, they trade profit for revenue. “You’ll always make less net revenue when you sell with a coupon code—every single time,” says Charnoff.
The challenge is that they’re not always the main reason a brand gets a sale in the first place. Here’s an example: Let’s say a shopper sees a video from a skin-care influencer, who shares a 10% off coupon code.
That shopper might buy because:
- The shopper loves the influencer.
- The value proposition the influencer expressed is extremely compelling and resonates with the shopper.
- The shopper is a huge fan of the brand.
- The shopper loves great deals and sees a discount code.
Because the brand offers the discount code in the first place, the brand makes less net revenue and profit, even if the shopper purchased the product because of reasons 1-3 above.
Another reason discount codes hurt brand profitability is that they leak onto sites such as RetailMeNot, Honey, Rakuten, and many others.
One could argue that the shopper who goes to RetailMeNot “deserves” the coupon because they went out of their way, but it doesn’t matter since they’re already at checkout. However, it reinforces this customer behavior: consumers expect coupons every time they shop.
“The general problem is that while coupon codes are an incredible conversion tool, they’re not always why you get the conversion in the first place. But, 100% of the time they eat into your margin,” explains Charnoff.
Charnoff and his team have a more profitable price incentive than leaky coupon codes with Fondue. “If you go into a brand’s Shopify, you’ll see the discount volume to date, and it’s often about 20-30% of revenue for brands. Their jaws always drop when we show them that,” adds Charnoff. “Coupon codes should really be considered a part of CAC.”
“Coupon codes trade profit for revenue, but they’re not always why the revenue exists.”
Introducing: CashBack by Fondue
Fondue is the ultimate solution. Shoppers still get hit with the same dopamine hit from coupons; they have to do a little bit more work, but they get more money.
How does it work? Shoppers see their CashBack eligibility throughout the purchase journey. Post-purchase, they have the option to redeem CashBack in the following methods: store credit, gift cards, cash, and more to come soon.
After the purchase, the shopper receives an email where they can redeem their CashBack as cash or site credit. Brands often incentivize shoppers to select site credit by juicing up the site credit value compared to the cash option.
For shoppers who seek value, they enjoy more savings with CashBack. Some shoppers don’t redeem the cashback at all - meaning the price incentive was not key to converting in the first place. Given CashBack is more profitable than standard discounting, brands often increase the CashBack value which drives more revenue.
“Shoppers enjoy CashBack because it empowers them to choose the incentive most appealing to them.”
What is Fondue’s Value?
What success has Fondue seen so far?
Brands using the platform have significantly increased conversion rates and net revenue. Robin Golf, for example, has seen a 7.8% increase in conversions and 46% lower discount costs per transaction after switching to CashBack by Fondue.
“We’ve been thrilled with the success of the Fondue CashBack product to date. The data has shown it to be more effective in driving sales, re-purchase, and customer engagement than traditional discounting,” shares Peter Marler, cofounder and CEO of Robin Golf. “As a result, we have decided to expand our use of CashBack to replace our discounting strategy entirely.”
And it’s super easy to implement. Brands simply swap out their discount codes with CashBack UTMs.
Key Use Cases
Since they’re replacing discount codes with a simple UTM link, there are so many use cases—ads, influencers, SMS campaigns, popups, and more.
Plus, brands can easily a|b test to build confidence in Fondue. Most brands, according to Charnoff, start by splitting a Cashback to standard discount in a Klaviyo and Attentive email/SMS capture and welcome series sequence.
Brands can easily measure:
- Email/SMS capture rates
- Conversion rates
- Profitability of the conversion
“We build trust with brands often through A/B tests. The transparency of the data shows how CashBack increases CVR and profit - way better than coupons site popups, welcome offers and seasonal sitewide promotions.”
- What to pledge
- How to improve
- Which tools will set you up for success
I think the most important thing brands can do in 2023 is to better manage their customer data—both ethically and effectively. There’s an opportunity for brands to know their customers better than ever before—a clear benefit for both the customer and the brand. When you manage your data correctly, you’ll create stronger and more personalized ads, creative, site experiences, and so much more.
This is a classic: Let the data guide you. Go where the buyers for your products are and communicate with them on a personal level (i.e. by persona and funnel position) and nurture those relationships (past, present, and future customers). It’s possible—all through data.
We recommend that Shopify brands analyze and update their websites using data-driven decisions. Using analytics tools such as heatmaps and scrollmaps can help brands better understand how customers are interacting with their store.
Store owners tend to make assumptions about the way customers interact with their website. Most never go back and analyze their design choices to find pain points or areas of opportunity. By using heatmaps and scrollmaps, they can see where real customers are clicking and concentrating their attention. Leveraging this data, brands can start to iterate on design and make their online store experience streamlined and intuitive.
Hotjar provides a simple way to implement heatmaps, scrollmaps, and recorded user sessions on your site, helping you acquire incredibly informative user data. Additionally, it gives you the ability to create on-site surveys, which allows you to obtain direct and often critical feedback from users about their experience.
Test various attribution models and analyze the impact on your business. At Fifty Six, we are always here to help our clients identify and optimize their approach—a critical step in any successful marketing strategy.
If I’ve said it once, I’ve said it a million times–Customer Lifetime Value. And even more importantly, Future Lifetime Value (FLTV). With the ever-growing importance of first-party data, it is crucial that brands take a good look at their CRM and FLTV metrics.
OrderlyEmails is our go-to tool for transactional emails. It helps us level up our brands’ email aesthetics with customizable, quick-to-implement Shopify templates.
Lately, I’ve been really interested in Smile.io’s loyalty platform. Their UX is fantastic for teams with low bandwidth!
Stop allocating budgets to low-hanging fruit that doesn’t move the needle on conversion. Think about what’s really going to improve your CX and the return of undertaking different initiatives—not just on what’s top on your list of bugbears on the site!
One of the best ways to understand your customer behavior is by using HotJar. Their heat-mapping and screen recording tools shine a light on where customers are navigating to and from on your site, where they're rage clicking and experiencing frustration, and where conversion is dropping off within real life customer journeys and flows!
Understanding your customers’ pain points via data and analytics , will allow you to work with your CRO/CX Agency to solve customer frustrations and improve conversion.
Rewind backs up all product, customer, and order data for Shopify sites—essential since Shopify itself doesn’t provide this solution. It's saved so many of our clients time and money from administrative accidents.
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33% of customer service inquiries are pre-sale questions. What does this mean? If you’re not investing in customer service, you’re missing out on revenue-generating opportunities.
The benefits of elevating your customer experience:
- 10% to 25% increase in AOV for customers who engage with live chat pre-purchase
- 21x higher conversion rate for customers who reach out via Live Chat or SMS compared to other site visitors
- 87% of customers who have a great customer experience will make another purchase
- 72% of customers share positive experiences with 6 or more individuals
Gorgias is our favorite Helpdesk platform. They can reduce costs by 35%, primarily by decreasing the average ticket handle time. Their machine learning algorithms are trained on millions of ecommerce-related interactions across Gorgias’ customer base and provide accurate, automated replies for the most common ecommerce inquiries. This helps our agents resolve tickets faster, which provides the customer a seamless experience.
Trust your agency! Agencies do the same things across multiple brands and niches, so we see the trends and have the practice and experience!
Don't be afraid of data and insights. If customers aren't clicking on your emails, try a new CTA. If your ads are driving good metrics at a small spend, start scaling. If your customers are complaining about a product, look into QA! If the data tells you something isn't working, let it go and try something else!
I'm supposed to say Tydo, right? 😉
Double down on differentiation. There will be a lot of headwinds this year and standing out from the crowd will set you apart.
A picture is worth 1,000 words. A video? Probably millions. In ecommerce that value translates into engagement, acquisition, and retention—everything you need to impact your bottom line.
At soona, we've seen the we've seen the impact of creative and the continuous split testing of it yield results. Our resolution is to challenge ourselves and double down on innovation and creative optionality so that each brand we work with can distinguish themselves in a crowded sea of D2C ecomm. We'd love to see our brands share this resolution and keep pushing the creative limits.
Klaviyo. We're using it to power our email and newsletter at soona too!
Optimize your returns strategy! This can lead to valuable customer insights, enhanced user experiences, and increased revenue and customer loyalty.
Brands need to dive deeper into understanding their customers to set themselves up for success. Conduct research to gain insights into customer needs, preferences, and behaviors. By doing so, you can develop targeted strategies that will enhance customer experience and boost overall retention.
Right now I would say Gorgias. Having a good customer service tool is crucial to building strong customer relationships.
Start paying heavy attention to data, specifically around retention. We see a lot of effort put towards acquisition with the assumption that once someone buys, they are your customer forever. Instead, get to know your customer, understand their needs, and analyze their behaviors once they are on-site and judge their sentiment after they have visited. Work with a retention focused and data-driven agency to implement tools that contribute to repeat business and customer delight. It will pay dividends.
When surveyed, about 80% of ecommerce merchants think that they are delivering a great experience to their customers. However, when the same customers are surveyed, only 8% of those customers think that they are getting a great experience from the merchant. Now, more than ever, retaining loyal customers is an essential part of any online business and you should spend time with your customers to judge their experience with your website and products and offer improvements based on that feedback.
Tydo's report cards are an essential tool, along with Klaviyo for email and SMS, Recharge for subscriptions and memberships, Okendo for reviews and surveys, Rebuy for AI driven collections and upsells, Loop for self service returns... each tool is great on their own, but their strength as the ultimate tool comes from when they are used together!
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Report Cards is a customized glimpse into your business, delivered to your inbox for free.
Report Cards consolidates all your key metrics across platforms for an at-a-glance pulse of your business.
Discover metrics for every team member so they can stay updated with the right data on a daily, weekly and monthly basis.
It's free because we believe everyone should have access to the basics.
Portfolio is a hub for analytics across multiple Shopify stores. The perfect tool for agencies.
See an aggregate view of all your data for all your stores in one place.
Make real time assessments on marketing initiatives across every storefront you manage.
Analyze the performance of one store versus another in seconds.
More about the project
Here at Tydo, we try to highlight DTC founders who run their business in various ways. And, that's because there's no "right" way to run a DTC brand.
This project illustrates exactly that. Whether it's how a founder supports their team or how they talk about mental health in the workplace, every founder has a different approach. How do they discover these different approaches? One way: reading. Discover the greatest books that have changed the way 15+ founders think about or operate their business.
You can also listen to these book picks on Spotify or Anchor.fm.